China factory activity falls again in January

Factory activity contracted again in China during January for the fourth consecutive month as the world’s second-largest economy continued to struggle.

The manufacturing purchasing managers’ index rose slightly to 49.2 in January from 49 in December, the National Bureau of Statistics said on Wednesday.

The official non-manufacturing managers’ index rose to 50.7 in January from 50.4 the prior month with a strong services sector offsetting construction industry weakness amid a crisis in real estates.

A PMI reading above 50 indicates expansion, while anything below points to a contraction.

The country’s central bank last week unexpectedly announced a cut in the amount of liquidity that banks are required to hold as reserves as it tried to provide some form of stimulus to kick-start economic growth.

"Overall, the PMI data shows that China’s economy remains relatively soft, as confidence remains weak. Until forward-looking indicators such as new orders return to expansion, economic momentum is likely to remain tepid," said ING China chief economist Lynn Song.

"Employment remaining in contraction in both the manufacturing and non-manufacturing surveys also indicates that the job market remains weak, which will continue to be a headwind to consumption."

"While we have seen numerous piecemeal supportive policies targeting specific sectors released over the past few months which have helped stabilize growth somewhat, markets are looking ahead to the Two Sessions in anticipation of a larger-scale policy package. The larger-than-expected 50bp RRR cut last week could be seen as a signal of more significant supportive policies ahead."

Reporting by Frank Prenesti for Sharecast.com